Complementary Goods: Prices and Consumer Welfare Under Duopoly and Monopoly |
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Authors: | Oleksiy Andriychenko Audrius Girnius |
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Institution: | 1. Analysis Group Inc. , 10 Rockefeller Plaza, 15th Floor, New York, NY 10020 Phone: 212 492 8144 Fax: 212 492 8144 E-mail: oandriychenko@analysisgroup.com;2. Analysis Group Inc. , 10 Rockefeller Plaza, 15th Floor, New York, NY 10020 Phone: 212 492 8144 Fax: 212 492 8144 E-mail: agirnius@analysisgroup.com |
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Abstract: | We examine prices, profits, and consumer surplus for differentiated complementary goods under duopoly and a multi‐product monopoly. We find that little can be said about the relative magnitudes of prices of the components of a system of complementary goods under the alternative market structures. Although demand complementarity can lead to lower prices for either the primary or the secondary good under monopoly, both prices are not necessarily lower. The results unique to this paper are that, when two complementary goods form a system, the system price is unambiguously lower and consumer surplus and profits are higher under a multi‐product monopoly. |
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Keywords: | Complements Multi‐Product Monopoly |
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